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canola seeds, a nasty insecticide and a convoluted clause of the North American Free Trade Agreement — the feds are in trade trouble again.This time around, the Canadian government is fending off a $100 million suit from U.S. chemical giant Crompton, the largest maker in Canada of the insecticide lindane. Once again, Chapter 11, the NAFTA clause allowing companies to sue governments for loss of profits, is proving a major pain in the butt. What’s startling in this debacle, trade critics say, is how far Chapter 11 can be stretched to accommodate any sort of corporate tiff with government.
It’s not every day that a U.S. multinational accuses the Canadian government of buckling to political pressure from the U.S. That’s what Crompton alleges the feds did when Canada phased out lindane use last summer.
The company is now seeking $100 million in damages. Crompton has also filed a separate civil suit in federal court asking that the insecticide-treated seed be re-registered for use in Canada.
If that happens, the potential environmental fallout could be devastating, say eco groups, who point to studies showing lindane’s presence in the food chain and even breast milk.
Steven Schrybman, a lawyer for the Council of Canadians who’s been following NAFTA cases, says “This (Chapter 11) regime is completely outrageous. Corporations are just waking up to what a wonderful tool it provides to punish governments that get in their way.’
The Crompton controversy began in 1998, when Canadian canola growers using lindane-treated seed found it increasingly difficult to sell their product in the U.S. The U.S. Environmental Protection Agency had phased out lindane, which has been linked in the lab to cancer in mice, for use in canola seed in that country.
In answer to Canadian farmers’ concerns about access to U.S. markets, a phase-out of products containing lindane was negotiated between manufacturers of the product (including Crompton) and the Canadian Canola Growers Association. That phase-out was to have been completed by July 2001.
Crompton claims it never agreed to the phase-out, despite a letter from the Canola Growers to the feds suggesting otherwise.
Crompton alleges it had an agreement with the feds to continue selling its lindane-treated canola seed in Canada until its stocks ran out. But it says the government reneged on the agreement and announced a ban under pressure from U.S. growers.
Canola growers in North Dakota complained to their congresspeople, and next thing you know Canada was prohibiting the treated seed and setting fines of up to $200,000 for its use, or so the story goes as Crompton lawyer Michael Phelan tells it.
“It was purely political,” says Phelan. “Those farmers can’t compete with the Canadian product. They get pissed off, complain to their congressman, and away you go.”
U.S. canola growers have long complained about being at a competitive disadvantage to their Canuck counterparts.
Because lindane is banned for canola use in the U.S., growers there are forced to use seed treatment products that are four times as expensive.
The feds say they were only reacting to concerns from Canadian farmers over access to U.S. markets when the decision was made to phase out lindane-treated canola seed. Crompton, the feds say, is now trying to get the government to compensate it financially for its own screw-up — namely, producing more lindane-treated canola seed than it can sell now that it’s been phased out in Canada.
Marc Richard, a spokesperson for Health Canada’s Pest Management Regulatory Agency, points out that it was Canadian canola growers themselves who approached the government about phasing out lindane-treated seed. “There was no action on our part where we told Crompton, “Take this off the market,'” Richard says.
Canadian obligations under international treaties on the use of “persistent organic pollutants,” Richard adds, also played a part in the lindane phase-out.
But complicating Canada’s position in the Crompton case is the fact that lindane, while banned for use in canola seed, is approved for use in seeds for other crops.
Even after the phase-out of lindane-treated canola seed, the feds were considering giving Canadian canola growers special permission to use of some the 2.7 million acres’ worth of lindane-treated seed farmers were left holding.
Both Canada and the U.S. are currently conducting their own scientific reviews of lindane. Word is, both are leaning toward setting residue limits on lindane in seed rather than an outright ban.
But Canadian governments past and present, unlike the U.S. and Europe, have shown little inclination to regulate on matters of health and the environment.
In lindane’s case, the attempt was made in order to maintain access to U.S. markets. It’s ironic, then, that the feds now face the prospect of paying out tens of millions of dollars for unfair trade practices. That’s Chapter 11 for you.enzom@nowtoronto.com
